Wall Street Analysis

By Paul Dykewicz, PBI Media

Feisty EchoStar Communications [DISH] of Littleton, Colo., never seems reluctant to engage in legal proceedings. The company is entering the courtroom again on two fronts to resolve a pair of long-contested issues from the past.

In one case, EchoStar is fighting the major U.S. television networks: ABC, NBC, CBS and Fox [FOX]. No one should accuse EchoStar of only picking on the little guys. The company backs away from nobody! In this legal tug-of-war, the company is accused of having infringed on the broadcasters’ copyrights by providing distant network signals to customers who could not receive their local channels.

The law only allows EchoStar to provide a distant network signal if a customer lives in a location where the signal of the nearest local network affiliate cannot be received with an off-air antenna, explained Bob Peck, the satellite analyst at Bear Stearns. A U.S. district court in Florida ruled in favor of the broadcasters in June 2003, and EchoStar’s appeal was scheduled to be taken up at press time Friday. In Peck’s view, less than 10 percent of EchoStar’s subscribers are exposed to the distant network issue. He did not expect the ruling to have more than a minimal impact on EchoStar’s churn and average revenue per user (ARPU).

In another legal matter, EchoStar may receive a permanent injunction that would allow it to continue broadcasting Viacom channels. Viacom had sought to withdraw broadcast rights for its CBS-owned stations. EchoStar contended 1.6 million of its subscribers would be denied popular CBS programming due to the dispute, and the permanent injunction would allow EchoStar to continue carrying the Viacom channels while antitrust claims against the broadcasting company are pursued.

Litigation is nothing new for EchoStar. With the company’s growth continuing unabated, Peck rates EchoStar to “outperform” the market. I agree.

Paul Dykewicz is senior editor and senior analyst of Satellite News. He can be reached at 301/354-1769 or at [email protected].